Options for Investing for Your Retirement

Many people get nervous when it comes to thinking about retirement investing. It can be a very confusing process with complicated terms and options available. However, it is vitally important to save for your future. The earlier you start the better when it comes to saving for retirement. The successful investors are the ones who consistently put money away no matter what the markets are doing. To reach your financial retirement goals there are a couple of options available to most people.

401(k)

If you work for an employer who offers a 401(k), or similar plan, it is quite easy to save for retirement. Whether or not you use the 401(k) at your job depends on a couple of factors. Many of these accounts are set up by commissioned salespeople who talk employers into using their plans. These plans often have much higher costs than if you invested on your own. Also, many 401(k) plans are very limited in the choice of funds you can invest in. You must compare your 401(k) with other investment options in order to determine whether or not is the right choice for you. However, if your company offers a match to the dollars you invest then it is wise to at least invest up to the percentage that your company matches no matter what the choices are in the 401(k). The reason is because the match that the company provides creates an automatic return on your investment.

Traditional IRA

If your company does not offer a 401(k) or you do not qualify for it than there is always a traditional IRA. Much like a 401(k), an IRA allows you to deduct the money invested in the taxes you pay. This allows you to put more money to work in your retirement account and you pay taxes later on when you take the money out in retirement. You could easily set up an IRA online with many different companies. You can set up automatic deductions from a checking account or savings which helps make investing for retirement quick and painless.

Another form of the IRA is the Roth. It is identical to a traditional IRA with one big exception. You do not receive a tax credit for the money invested in the Roth. In return, since you are to pay taxes on your investment money, you never have to pay taxes on the money you withdraw in retirement. The best IRA plans are the ones who feature low-cost investing such as Vanguard.

There are many different financial calculators online which can help determine whether a traditional or a Roth IRA is the best choice for you. There are even calculators which allow you to compare a 401(k) with investing in an IRA.